Bitcoin is a risky investment that could easily plunge 50 percent next week to levels seen only last month, said a former hedge fund strategist who is now a digital currency investor.

But Dan Morehead, founder and CEO Pantera Capital, predicted Tuesday that bitcoin in the long run is likely to spike much higher than current prices of about $18,200 per unit.

"For the big blockchains like bitcoin, ethereum and ripple, we're in the first innings of a multidecade thing," said Morehead, who bought bitcoin when it was at just $72. "And there's going to be some ups and there's going to be some downs, but we're still really early."

Blockchain, the technology underlying bitcoin and other digital currencies, is an anonymous, decentralized public log that records all transactions.

Bitcoin could be "down 50 percent next week ... where it was a month ago," Morehead said on CNBC's "Squawk Box." But in a year, "it'll be much higher than it is today."

Morehead, who began his career at Goldman Sachs as a mortgage-backed security trader, characterized bitcoin and other digital currencies as "digital gold." He also worked as head of macro trading and CFO at Tiger Management, the hedge fund founded by investing legend Julian Robertson.

In 2003, Morehead founded Pantera Capital, an institutional investment firm focused exclusively on digital currencies and related companies. In 2013, Pantera launched its first cryptocurrency fund. The company said the fund gained 60 percent in November and December, and more than 12,000 percent in four years.

Meanwhile, cryptocurrency mining — the process that uses complex computer chips, hardware and electrical power to make bitcoins — is growing quickly, Morehead said. "There was a period where it was doubling every six weeks. So it's like Moore's Law on crack," he said. But he added that the mining business has recently gotten more difficult and extremely competitive.

Bitcoin futures launched on the world's largest futures exchange, CME, on Sunday, a week after the Cboe launched its own bitcoin futures. Many see the launch of bitcoin futures as a step toward establishing the digital currency as a legitimate asset class, while others see bitcoin as a "bubble" and the futures as a way to easily bet against the cryptocraze.